The rising popularity of modern monetary theory (MMT) has inevitably brought misconceptions. Critics across the political spectrum often claim that MMTers want sovereign governments to “just print money” with no concern for the national debt or, as Max B. Sawicky suggests, inflation. Some, especially on the Right, point to Venezuela and Zimbabwe as classic cases of hyperinflation.

But MMT points to a different primary cause of inflation in developing countries: not domestic spending, but foreign debt and a resulting lack of “monetary sovereignty.”

A country has full monetary sovereignty when it has its own national currency that is not fixed to the value of gold or another nation’s currency; it uses that currency to impose taxes, fees and fines; and all its debt is payable in that currency. Countries that meet these criteria, like the United States and Japan, face no external constraints on government spending, as Pavlina R. Tcherneva explains. The risk of inflation remains under control so long as government spending does not outpace the economy’s real productive capacity—the availability of physical resources, skilled labor, equipment and technical know-how.

For developing countries, the problem begins with trade deficits and resulting debt owed in foreign currencies.

Those deficits are the product of fundamental economic shortcomings, themselves often a legacy of colonial rule. Postcolonial countries are typically unable to produce enough food and energy to meet domestic need, and they face structural industrial and technological deficiencies. Because of this, they must import food and energy, along with essential manufacturing inputs. For example, Venezuela lacks refining capacity, so—while it exports crude oil—it must import more expensive refined oil, contributing to trade deficits.

Importing more than they export causes these countries’ currencies to depreciate relative to major currencies. With a weaker currency, new imports (like food, fuel and medicine) become relatively more expensive. This imbalance is the real driver of inflation, and often of social and political unrest.

The International Monetary Fund (IMF) historically steps in at this point with emergency loans coupled with painful austerity measures. To get out of IMF conditions, even progressive policymakers typically prioritize acquiring foreign currency reserves in order to honor external debt payments. They promote tourism (tourists bring foreign currency) and design agricultural and manufacturing policies to support export industries. Meanwhile, industries that would build self-sufficiency (and thus fix the trade imbalance), like food crops for domestic consumption, receive little government support. All of this decreases self-sufficiency and reinforces the dependence on foreign goods that caused the debt in the first place.

Most developing countries looking for foreign currency also open their economies to investment from foreign corporations, agreeing to low environmental standards, weak labor regulations and tax exemptions, going deeper in the hole.

So what would an MMT-informed solution look like to help developing countries regain monetary policy and their ability to spend on domestic priorities? The goal is to reduce imports, secure a favorable trade balance and pay off their debts, so countries would focus on the root causes of trade deficits: invest in sustainable agricultural practices (like aquaponics) to restore food sovereignty; build renewable energy (like solar) to secure energy sovereignty; and invest in education and research and development to increase productivity and gain the ability to manufacture more valuable products. Such development would also increase the real productive capacity of the economy, meaning that governments would have more room to spend before inflation.

By illuminating the origins of postcolonial economic struggles, MMT shows us how to overcome them.

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Which of you ranters have been to Venezuela or even know a Venezuelan? Chavez is a sinner to the right as he tried to distribute land to the poor. That has been a goal in Latin and South America for a long time. The wealthy, who control import and distribution of goods have shut the place down in order to regain control that they lost when the people voted in Chavez. Just look at the well dressed "rioters" you see on the TV. Wealthy people are always threatened by any redistribution scheme and use current tactics to gain external support for their staying in power. Look at Brasil. Almost 3/4 of their "elected" representatives were being charged with corruption by their leader so what did they do? They charged her with corruption and replaced her with another of their corrupt politicians. So it goes.

As election looms, president blames rising food prices on 'capitalist' retailers while critics accuse him of scapegoating

Rory Carroll in CaracasSun 27 Jun 2010

" 80,000 tonnes of imported food discovered rotting in government warehouses, a scandal that prompted the arrest of senior officials. Some government-run stores are showing strain: bare shelves and scarce meat. "No chicken, and they make you buy tomato sauce with everything," grumbled one shopper, Elvira Sierra, 54.

Undeterred, the government has pressed ahead with the takeover of farms, processing plants and supermarkets and threatened to nationalise Polar, Venezuela's leading beer and food company. Troops have seized company land, impounded "illegally stored" food and made hundreds of inspections. "

80,000 TONS

while, at the same time........../

" You could call Omar Cedeño many things: a class traitor; a tool of international capitalism; a criminal suspect; even an enemy of Hugo Chávez's socialist revolution. You could also call Cedeño, who sells meat from a cramped shop, a butcher.

He has been a fixture in the Candelaria district of Caracas, Venezuela's capital, for 20 years, flapping in and out of his shop in a grubby white coat, arranging cuts of beef, pork and chicken in a display case, joshing customers."

There are fewer jokes these days. Military police recently seized Cedeño and dozens of other butchers on suspicion of overpricing.'

Cedeño's alleged crime: selling beef for £4 a kilo, well above the regulated price of £2.58. He does not deny it – prices are marked on a white board behind the counter. "I've got to cover my costs. What business doesn't? Yet eight officials came here to arrest me. It's an abuse of power."

"Venezuela lacks refining capacity" - something it could feasibly have received if it had never been colonised?

For that matter, blaming Spanish colonial rule (there was no other that counts in Venezuela) for it lacking refining capacity is laughably absurd. Were the Spanish supposed to have set up an oil refining infrastructure in the 18th century?

you probably should stop typing and go back to sniffing your grannie's panties while jerking

Posted by fuster on 2019-01-09 00:27:08

There is no destruction of the press and Venezuela's electoral system is the b3st in the world.

You're just a lying fascist giving rim jobs to the rich.

Posted by john g on 2019-01-08 23:41:31

I haven't covered anything up, dipshit.What were economic conditions like before President Chavez, wank stain?

Posted by john g on 2019-01-08 23:39:42

then why are you attempted to pretend that a coup attempt against him brought on by his own malfeasance somehow justifies his usurpation of power and destruction of freedom of the press, gerrymandering and destruction of voting rights ....

... not to mention how in hell any coup attempt could explain his disastrous economic and monetary policies that squandered Venezuela's natinal wealth?

Posted by fuster on 2019-01-08 23:00:38

Yes he did. They failed, he handed himself in and did the time. Unlike your friends hiding in the USA.

Posted by john g on 2019-01-08 20:45:12

wasn't it Hugo Chavez who attempted a military coup d'etat against the elected government in 1992?

you're such an ignorant and lame-arsed turd-eater

Posted by fuster on 2019-01-08 19:58:22

Caudillos of the left? LOLz. Propagating rightwing regime change propaganda and your obvious dislike of democratic rule is what identifies you as a fascist.Wank stain.

Posted by john g on 2019-01-08 18:26:41

understanding Chavez's errors and disliking South American caudillos of the left as much as of the right doth not a fascist make, you turd-eating tiny-brained twerp

Posted by fuster on 2019-01-08 17:40:10

LOLz@you, fascist dickhead.

Posted by john g on 2019-01-08 16:46:17

and you're no more than a stupid little turd-eating troll who is unable to present an actual argument.

keep jerking yourself and shut up

Posted by fuster on 2019-01-08 15:34:19

Your assertions are not facts. You're just an economically illiterate RWNJ with a chip on your shoulder.

Posted by john g on 2019-01-08 11:17:07

No want to be working in farms,growing their food,spoiled people.....

Posted by Lupe Delg!dillo on 2019-01-08 11:02:48

as if you have the right to make any such comment, you witling

Posted by fuster on 2019-01-08 03:45:52

john, try dealing in fact and evidence.

your argumentation is devoid of them and you make yourself appear to be an idiot by offering NOTHING other than naked contradiction without any support for your horseshht.

fact-based argument or shut the fluck up and go away

Posted by fuster on 2019-01-08 03:44:45

You're so illiterate that you don't know that you're contradicting yourself.

Posted by john g on 2019-01-08 00:22:29

and yet you introduce no factual support for any thing that you say.

how the hell can you claim that the loss of 80% of the country's export revenue from a "one'crop" economy is NOT central to the shortages and the inability to import food and medical supplies?

why is the population starving?

there is no embargo of foodstuffs and no way to enforce any real embargo if the people had any money in their pockets.

but, of course the Venezuelan govt destroyed the monetary system as well as the economy, so that even if they have any Venezuelan money, the stuff is no more than worthless paper.

Posted by fuster on 2019-01-07 23:42:23

That isn't vaguely like reality. You're either economically illiterate or disingenuous.

Posted by john g on 2019-01-07 22:59:20

there wouldn't be widespread shortages of goods if the oil was still flowing and the govt could pay the bills to import everything.

let's try to stay grounded in reality and not let ideology blind us to simple factual truth.

Clearly i wasn't referring to the oil business when I had referred to the shortages of goods that have caused inflation. Moron.

Posted by john g on 2019-01-07 21:47:55

The goods shortages are caused by price controls and the lack of hard currency to purchase them from abroad. Not to mention the political and military “skimming off” the majority for themselves.

Posted by JustJoe on 2019-01-07 19:51:14

idiot. the oil company was long ago nationalized and is entirely run by a board of directors appointed by the government.

why are you lying?========================September 1, 1999

Venezuela's President Puts Ally in Charge of Oil Company

By LARRY ROHTER

CARACAS, Venezuela -- President Hugo Chávez moved to solidify his control over the powerful state-run oil monopoly Tuesday by appointing an ally as the company's new chief.

A day earlier, the previous head resigned, saying that an internal dispute had made it impossible for him to stay at Petróleos de Venezuela, which controls the largest reserves of oil outside the Middle East.

Chávez appointed Héctor Ciavaldini to head the company, saying the move would correct "the erroneous policy of the previous Government." He said he would announce other "small changes at the board level" soon.

As a candidate for President last year, Chávez, a former army colonel who in 1992 led an unsuccessful coup attempt, criticized P.D.V.S.A., as the company is known here, as an uncontrollable "state within the state."

Posted by fuster on 2019-01-07 19:36:09

You're obviously not going to engage in an honest discussion. The government doesn't run those things.The economic and political warfare started when the Bolivarians were first elected.There was a coup in 2002 for chrissakes.

Posted by john g on 2019-01-07 18:01:29

the shortage LONG pre-date any embargo.

there was little meat or toilet paper in Caracas a decade ago ENTIRELY because of Chavez's idiotic economic policies and attempts to destroy the wealthy businessmen who opposed his policies.

Chavez had butchers tossed into jail for selling chops at prices above the artificial ones he demanded.

toiletpaper was scarce because his flunkies couldn't figure out how to run a supply chain

thousands of tons of meat rotted in dockside warehouses IN THE MIDDLE OF MEAT SHORTAGES simply because his appointees were hired because of loyalty rather than ability

Posted by fuster on 2019-01-07 17:26:20

Nonsense and economic illiteracy. The oil issue did not cause the goods shortages that are causing inflation.The embargoes are doing that. If the sanctions had no effect as you claim, they wouldn't bother with them. Logic is not the strong point of the extreme right.

Posted by john g on 2019-01-07 17:15:42

horseshht. utterly.Chavez wrecked the oil company by appointing puppets to manage it and who ruined it by allowing to syphon off all the revenue without leaving enough money to maintain the equipment.once Venezuela was able to pump 3.2M barrels/day. when Chavez kicked the bucket, all they could pump was 2.3M barrel.

now the deterioration has become so advanced that 1M/day may no longer be possible.

given that Venezuela's entire economy rests on oil revenue, the economy was destroyed by that...especially when the $100/barrel price when Chavez was riding high has crashed and now is closer to $50.

that wasn't economic warfare at all. that was suicide

Posted by fuster on 2019-01-07 17:08:33

What an appalling article. Venezuela is going through a social and economic collapse that is almost unprecedented in its lack of being caused either by a war or natural disaster. Obviously such a human catastrophe can't be explained by colonialism: Venezuela is no more the product of colonialism than any other country in Latin America. It's hyperinflation is the result of issuing currency far beyond the productive capacity of it's domestic industry, exactly as MMT (or any other monetary theory for that matter) would predict.

On the top level, 90% of Venezuela's foreign currency came from the sale of oil, that includes practically all the inputs for Venezuela's other anemic domestic industries. Oil production has fallen from over 3 million barrels a day to ~1 million barrels a day, for which it receives almost no free cash due to gross corruption, vast production inefficiency, particularly of PDVSA, the national oil company, and the need for geopolitical support from China and Russia, to whom it owes $10s of billions, in order for the increasingly unpopular regime to stay in power. With 90% of it's hard currency gone, domestic companies have become moribund, unable to get inputs, secure credit, or pay employees, whose wages are increasingly paid directly by the state in inorganic money, even as the companies that they work for produce no products.

How PDVSA was destroyed and $10s billions were squandered and stolen, and why the country failed to expand non-oil exports are more complex questions, but the country's status as an ex-colony figures very minimally.

Posted by Earl D. on 2019-01-07 15:34:01

Economic warfare by the USA is the major cause.

Posted by john g on 2019-01-07 15:19:15

And yet you are unable to mount even the beginning of a cogent argument against his. Curious.

Posted by john g on 2019-01-07 15:18:38

what a crock of shht.

Venezuela is experiencing inflation because of the ridiculously poor economic and monetary policies of its own government

Posted by fuster on 2019-01-07 12:52:35

You sir are an idiot and perform a disservice to the students of Denison University who are exposed to the tripe which you are peddling.